Journal of Applied Finance & Banking
The Role of Premium Calculation in the Stability of Private Insurance Companies: The Case of Germany
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Abstract
One of the most crucial components of a country’s social security system is health insurance. Positive developments of health sector enable the opportunity to receive high quality service. In order to offer these services it is essential to deal with the premium calculation subject seriously. Moreover, the accuracy of these calculations provides the longevity of insurance companies and the lack of gap between their incomes and expenses. In this article insurance premium calculation in the private health sector in the Germany case was investigated. After giving detailed information on the health sector, the relation between the net premium and the principle of equality had been examined and the net premium was obtained. Then by examining the constituting elements, the gross premium was calculated. Consequently to control the risks that may occur in the following years, the importance of reserve accumulation for old ages was emphasized. By premium calculations, the necessity of covering the probable benefits with the total premium and reserves was observed.
